Student Loan Deferment
Postponement and delay of student loans
We all reach times in our lives when making ends meet becomes difficult. Thankfully, student loan lenders usually have options that can help you during times of financial hardship. Deferment and forbearance options are available to you depending on your circumstances.
Deferment
Deferring your student loans means you've postponed payments for a period of time. If you're still at least a half-time student in school, most lenders will automatically defer your student loan until six months after you've graduated or stopped taking classes. Economic hardship and difficulty obtaining employment are other reasons your lender might allow you to defer your loan.
While you loan is in deferment status, interest continues to accrue. You have the option of paying this interest if you can. Note that if you don't pay interest, it gets added to the balance of your loan after a period of time, usually when the deferment period ends. You could end up owing more on the loan than you originally borrowed.
Forbearance
Loan forbearance is another option to assist you in times of financial difficulty. There are several types of forbearance available.
- Reduced payment allows you to make lower monthly payments on your loan. If the payments aren't high enough to cover the interest on the loan, it will capitalize periodically. When the interest capitalizes, it's added to the balance of the loan, making the amount owed higher.
- Extended payment extends the length of your loan making the payments lower. When you extend the length of the loan, you end up paying more in interest over the life of the loan than you would have with a shorter repayment period.
- Temporary postponement of payments is similar to deferment. You're able to stop making payments for a period of time as agreed by your lender. Interest will continue to accrue during this period of time.
Different lenders have different requirements both for deferment and forbearance. Some require you to fill out forms verifying your financial hardship. Others require you to pay a fee for the convenience. If you're having trouble making your payments, it's best to contact your lender as soon as possible to avoid defaulting on your loan. If you wait, you may forfeit your options for deferment or forbearance.
When you contact your lender, ask what options they have for deferment and forbearance and how you can qualify. Make sure you understand:
- the length the deferment or forbearance period
- whether or not interest will continue to accrue
- if you are able to make interest payments
- whether you will be able to apply for deferment or forbearance in the future
- the amount of your payments after the deferment or forbearance has ended.